In GST practice, a common question is whether tax liability can still arise even if no invoice has been issued and no payment has been received. This is especially relevant in cases of unbilled revenue, a concept well understood in accounting by large organisations and professional entities, but sometimes misunderstood under GST. Delays in invoicing due to commercial disputes, approval delays, quality concerns, or ongoing negotiations are pretty common in business. Yet, the GST law follows its own Provisions and Rules, where taxability depends on the statutory time of supply rather than the time of billing. This article aims to shed light on this important topic by explaining, in a practical and legally sound way, why GST liability can happen even without an invoice and how taxpayers and professionals can handle this area with confidence, clarity, and compliance.
To appreciate this issue in its gently proper perspective, it is first necessary to understand what is meant by unbilled revenue in commercial practice and how this accounting concept intersects with the GST statutory framework.
I. Unbilled Revenue - An Accounting Reality That Often Precedes Legal Awareness
In today's business world, especially in big organizations and professionally run companies, the way revenue is recognized follows clear principles and standards. When a supplier has mostly fulfilled its obligations, revenue is recorded even if the official billing hasn't been done yet. This practice is both valid and important for truly accurate financial reports. The revenue that has been recognized but not yet billed is often called unbilled revenue.
In practical terms, unbilled revenue happens not because the supply hasn't taken place, but because sometimes there's a delay in the commercial processes catching up with actual operations. Disagreements over scope of work, measurement certification, quality standards, quantity checks, milestone approvals, price negotiations, or even internal permissions can often slow down the issuance of a tax invoice. However, from a business point of view, the supplier is aware that value has already been created, so they recognize it in their books.
However, GST law doesn't focus on accounting labels. The CGST Act, 2017, doesn't define or acknowledge the term "unbilled revenue." Instead, it recognises "supply" under Section 7. Once a supply occurs, the relevant statutory provisions rules about issuing invoices and determining the time of supply come into effect. Many businesses and professionals often struggle with this, mistakenly thinking that accounting recognition and tax obligations occur simultaneously.
The reality is otherwise. Accounting may tolerate postponement; GST law does not.किताबों में देर हो सकती है, कानून में देरी की कोई जगह नहीं।[There may be delays in accounting books, but the law allows no delay.]
This difference between how accounting is done and statutory taxation serves as the main basis for most disagreements concerning unbilled revenue under GST.
II. Why GST Law Does Not Allow Tax Liability to Wait for Commercial Comfort
GST is conceived as a time-sensitive, self-assessment-based tax, and this philosophy is deeply embedded in the statutory framework. Section 59 of the CGST Act mandates self-assessment by the registered person, which necessarily implies that tax liability must be identified and discharged at the correct statutory point - not at a point of commercial convenience.
If GST liability were permitted to wait until disputes are resolved and invoices are issued, the entire tax system would become vulnerable to manipulation. Commercial disagreements could be prolonged indefinitely, invoices could be strategically delayed, and tax payments could be deferred without any statutory restraint. The legislature was fully aware of this possibility and therefore designed GST so that taxability is not tied to billing discretion.
This intent is evident in the Act's structure. Section 31 prescribes when an invoice must be issued. Sections 12 and 13 prescribe what happens when it is not. These provisions are not punitive; they are preventive. They ensure that tax liability arises at a determinable and predictable point, irrespective of negotiations, correspondence, or unresolved commercial issues. In essence, GST law sends a clear signal: commercial uncertainty cannot be allowed to create tax uncertainty.
विवाद चले, बातचीत चले, कानून अपनी चाल से चले।[Disputes may continue, negotiations may go on, but the law moves at its own pace.
This legislative philosophy becomes even clearer when we examine how the law treats services and goods.
III. Unbilled Revenue in Supply of Services - Where Time of Supply Becomes the Decisive Factor
The phenomenon of unbilled revenue often arises with services, mainly because of their intangible nature and how they're provided. Services like consultancy, professional work, engineering, design, IT, software, EPC-related tasks, and long-term projects frequently include assessments after the work has been completed. It's common for clients to have questions, request clarifications, or ask for changes even once the service is mostly finished.
Understanding this commercial reality, the law provides a clear but limited timeframe for issuing an invoice. According to Section 31(2) of the CGST Act, 2017, along with Rule 47 of the CGST Rules, 2017, a supplier of taxable services is required to issue a tax invoice within 30 days from the date they supply the services (except for certain notified categories). It's important to note that this 30-day window is the maximum time allowed by law, not just a suggestion.
Once this boundary is crossed and the invoice isn't issued, the law clearly clarifies that the supplier can't stay in a state of uncertainty. Section 13(2)(b) statutorily steps in to set the time of supply as the earlier of the service being provided or payment being received. This helpful provision provides a clear legal guide for unbilled revenue in services.
Illustration: A consulting firm completes advisory services on 15 March. Due to disagreement on deliverables, the invoice has not been issued within 30 days. Payment is received only in April. From an accounting perspective, the firm may show unbilled revenue in March. From a GST perspective, however, if the invoice is not issued within the prescribed time, the time of supply becomes 15 March, and GST shall become payable based on that time by 20th April.
सेवा पूरी, विवाद जारी , कर की घड़ी रुकी नहीं।[The service may be complete and the dispute ongoing, but the clock of tax liability does not stop].
Judicial pronouncements reinforce this statutory position. The Supreme Court has consistently held that indirect tax on services attaches to the activity of rendering service, not to the procedural act of billing. GST law merely codifies this settled principle through Section 13. This statutory position is strongly supported by judicial pronouncements. The Hon'ble Supreme Court in All India Federation of Tax Practitioners v. Union of India, (2007) 7 STR 625 (SC), decided on 18 September 2007, held that indirect tax on services is a value-added tax on the activity of rendering service, and that the taxable event is the provision of service itself, not the issuance of invoice or receipt of consideration. The Court made it clear that procedural aspects such as billing cannot postpone the incidence of tax once the taxable event has occurred.
The same principle was reaffirmed in Commissioner of Service Tax v. Association of Leasing & Financial Service Companies, (2010) 20 STR 417 (SC), decided on 7 April 2010, where the Supreme Court observed that mechanisms of collection or accounting cannot redefine or defer the point of taxability prescribed by statute. These judgments, though rendered in the service tax regime, continue to apply with full force under GST, and are now statutorily embedded in Section 13 of the CGST Act, 2017.
IV. Unbilled Revenue in Goods - A Narrower Window and a Firmer Trigger
While unbilled revenue is often linked to services, it can also occur with goods. Examples include deliveries that need inspection, conditional acceptance, shortages, damages, post-delivery price negotiations, or supplies on approval basis. In these cases, suppliers might hold off on invoicing until any disagreements are settled. Even so, accounting standards may still require recognizing revenue, which can lead to unbilled revenue in goods transactions.
However, the GST law imposes far less tolerance for delays. The statutory obligation to issue an invoice for goods arises much earlier. Section 31(1) mandates that a tax invoice for goods should be issued either before or at the time of removal to ensure everything is in order. Delivery of goods, depending upon the nature of the supply. This leaves minimal scope for postponement. For determining the time of supply, Section 12(2) provides that GST becomes payable on the earlier of:
- the date of issue of invoice or the last date on which invoice is required to be issued under Section 31, or
- the date of receipt of payment.
The phrase "last date on which invoice is required to be issued" is thoughtfully included and truly important. It makes sure that even if an invoice isn't issued intentionally, it can't be used to delay paying taxes.
For example, goods are delivered on 10 March, but the supplier withholds the invoice due to a pricing dispute. Payment is received in April. Despite the absence of an invoice and payment, the time of supply shall arise on 10 March itself, because the invoice was statutorily required to be issued at or before delivery.
माल गया तो दायित्व आया, बिल रुका - पर कर नहीं।[Once goods are supplied, liability follows; the invoice may stop, but the tax does not.
This position is not just a legal requirement; it is rooted in well-established judicial decisions. Courts have consistently emphasized that the indirect tax on goods applies as soon as the taxable event happens, and this cannot be delayed through accounting practices or business negotiations. Section 12 of the CGST Act clearly affirms this principle, providing solid statutory support.
Judicial authority has consistently held that indirect tax on goods attaches once the taxable event occurs and cannot be deferred by accounting treatment, invoicing delays, or commercial negotiations. In Union of India v. Bombay Tyre International Ltd., 1984 (17) ELT 329 (SC), decided on 7 October 1983, the Hon'ble Supreme Court held that tax liability arises at the stage of the taxable event and that valuation or procedural mechanisms cannot postpone the levy.
This principle was reiterated in Eicher Motors Ltd. v. Union of India, 1999 (106) ELT 3 (SC), decided on 23 March 1999, wherein the Court emphasised that statutory tax liability cannot be altered or deferred by accounting entries or commercial arrangements. Similarly, in Commissioner of Central Excise v. Acer India Ltd., 2004 (172) ELT 289 (SC), decided on 9 September 2004, the Supreme Court held that post-clearance price negotiations or disputes do not suspend or defer tax liability once goods have been supplied. These settled principles are now clearly reflected in Section 12(2) of the CGST Act, 2017.
V. Settlement of Commercial Disputes - Adjustment of Value, Not of Time
The discussion about unbilled revenue becomes truly meaningful when the underlying commercial dispute is finally resolved. In everyday life, issues related to scope, quality, quantity, pricing, or performance don't usually stay unresolved for long. Usually, they lead to negotiations, settlements, compromises, or mutual adjustments that help move things forward. GST law recognizes this practical reality and has developed rules to handle settlement carefully and precisely. While a settlement can change the value of a supply, it cannot alter the original time of supply once it has been established under Section 12 or Section 13.
This distinction is very important. Once GST is triggered on a supply because of the time-of-supply provisions, that moment cannot be changed. Settlement doesn't undo this; it just adjusts the figures.
सप्लाई की तारीख लौटती नहीं, समझौता बस रकम बदलता है।[The date of supply never turns back;a settlement only changes the amount].
In the first and most straightforward scenario, the dispute is resolved at the same value that was originally contemplated. For instance, a consultant completes services in March for an agreed consideration of ₹10 lakh. Due to a disagreement over deliverables, the invoice was not issued, but GST was paid in March based on the expected value. If the dispute is later resolved and the client accepts the services at the same ₹10 lakh, the earlier GST payment remains perfectly valid. Issuance of the invoice at this stage is merely a procedural formality. No additional tax liability arises, and no adjustment is required. This scenario reinforces the correctness of paying GST at the time of supply despite commercial uncertainty.
In the second scenario, the settlement results in a higher consideration than what was originally envisaged. This is extremely common in practice. For example, an The ethering firm finished its services in March and paid GST on ₹50 lakh, considering it as unbilled revenue because of ongoing negotiations. Then, in December, the client either agrees to extra work or lifts certain objections, making the final agreed amount ₹52 lakh. It's important to understand that this ₹2 lakh isn't a new or separate supply but simply reflects the final value of the original work. So, GST is due on this additional ₹2 lakh. Additionally, interest under Section 50 of the CGST Act, 2017, is payable from the original date when the supply was made, not from when the payment was settled or the invoice issued. This shows that while the value can be finalized later, the tax timing is still based on the initial supply.
दाम बढ़े तो कर भी बढ़े, तारीख वही - जो पहले ठहरे।[If the price increases, the tax increases too, but the date remains the one fixed earlier]
In the third scenario, when the final settlement results in a lower amount than what was initially paid for GST, it reflects a common situation in transactions. For example, goods supplied in March are valued at ₹20 lakh, GST is paid based on this amount, but after inspection and negotiations, the final agreed value drops to ₹18 lakh. Fortunately, GST law provides a way to correct this, but it must be done within a specific timeframe. According to Section 34 of the CGST Act, 2017, you can issue a credit note and adjust the output tax liability, but this must be completed on or before 30th November of the following financial year (or the date you file your annual return, whichever comes first). It's important to note that this deadline is fixed.
If the dispute is resolved within this permissible window, the excess tax paid can be self-adjusted against outward tax liability. However, if the settlement is reached after this statutory deadline, the law does not allow reopening of past returns. In such a case, the supplier must necessarily resort to a refund under Section 54, which involves procedural compliance, documentation, and departmental scrutiny. GST law thus encourages timely resolution and disciplined correction, while consciously discouraging indefinite reopening of closed tax periods.
वक़्त रहते हिसाब सुधरे, देर हुई तो रास्ता बदल जाए।[If corrections are made in time, adjustment is possible; if delayed, the route itself must change]
From a practitioner's viewpoint, this settlement framework clearly communicates that GST law permits corrections but doesn't favour delays. Paying GST at the moment of supply for unbilled revenue might seem cautious, but it truly lays a solid groundwork. Any subsequent settlement simply adjusts the amount, ensuring the existing compliance remains steady and secure.
Concluding remarks
When you look at it on its own, unbilled revenue might seem like just an accounting term that you often see in balance sheets and management reports of big organisations. But as this article shows, unbilled revenue under GST is actually much more than a simple accounting detail; it's a real legal matter with important tax implications that happen repeatedly. As soon as goods or services are supplied, GST law applies its own set of provisions and rules-regardless of whether an invoice has been issued, payment has been received, or there are ongoing commercial disputes.
This discussion is very much grounded in everyday practice rather than just theory. GST practitioners often find themselves in situations where revenue has been recorded in the books but isn't yet reflected in GST returns. This can lead to audit questions, notices, interest issues, and avoidable legal challenges. Similarly, professionals working in large organizations-such as consultancy firms, infrastructure companies, broadcasting companies,EPC contractors, IT and engineering companies, and multinational corporations-routinely recognize unbilled revenue as part of solid financial reporting. For them, understanding how Sections 12, 13, 31, 34, 50, and 54, in conjunction with Rule 47, connect with this accounting approach is not just helpful but crucial for staying compliant and managing risks effectively.
For GST practitioners, this understanding strengthens advisory quality, audit defence, and litigation strategy. For in-house tax and finance teams, it enables alignment between accounting practices and GST compliance, reducing mismatches, interest costs, and regulatory friction. In that sense, the topic of unbilled revenue acts as a bridge-connecting accounting discipline with statutory compliance, and commercial reality with legal certainty.
कानून भरोसे से चलता है, और भरोसा धाराओं से बनता है।[The law functions on confidence, and that confidence is built on statutory provisions]
In the final analysis, unbilled revenue is not a problem to be avoided; it is a reality to be understood, anticipated, and managed correctly. When approached with clarity of law and discipline of compliance, it ceases to be a risk and instead becomes a mark of mature and responsible GST practice.
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